Investors Turn to Artificial Intelligence (GOOGL, FB)

Since the Alan Turing developed the Turing Test, scientific researchers have worked to develop a computer with the ability to function like a human brain. Over the years, scientists driven to make the human decision making process mechanical based on neural networks and algorithms created what is now known as artificial intelligence or AI.

While AI was once merely fodder for sci fi movies, today it has grown into a serious industry. With a new Terminator movie out in theaters, it seems as though Skynet could be even closer than we ever thought possible. An increasing number of tech companies are now sitting up and taking notice of the potential in such technological advances.

Background on Artificial Intelligence

For most people, artificial intelligence brings to mind robots that are able to think just like, or perhaps even better than, a human. Artificial intelligence research has been around for some time, but it wasn't until the 1950s that scientists began to pursue AI research in earnest.

In the last few years, there have been numerous technological leaps made in artificial intelligence, particularly in relation to the transportation industry. While it may be some time before we're all being ferried around in driverless vehicles, AI is already very much in use. Think of autonomous drones in the military, though the military is certainly not the only industry in which AI can be applied.

Investors Eye AI's Potential

As interest in AI has increased, investors have opted to funnel money into what has quickly become one of the hottest markets in the tech industry. CB Insights reports that the number of new AI startups is on the rise. The amount of money going toward AI startups is certainly not small potatoes, either. Sentient Technologies is an excellent example. This AI firm has been able to raise more than $100 million in funding.

While small start-up companies working in the AI sector have received their fair share of funding, large tech giants are also getting in on the action. Even Google Inc. (GOOGL) has expressed interest in AI through its acquisition of AI startup DeepMind at a price tag of $400 million.

Twitter (TWTR) has also discovered the potential benefit offered by artificial intelligence. The social media firm recently purchased AI group Whetlab, with plans for using the machine-learning startup for developing improved AI algorithms.

Recognizing the potential benefits offered by artificial intelligence, Facebook Inc. (FB) has also jumped aboard. When recently asked about the most significant initiatives his company will be working on in the years ahead, Mark Zuckerberg stated,"…we're working on AI because we think more intelligent services will be much more useful for you to use. For example, if we had computers that could understand the meaning of the posts in News Feed and show you more things you’re interested in, that would be pretty amazing. Similarly, if we could build computers that could understand what’s in an image and could tell a blind person who otherwise couldn’t see that image, that would be pretty amazing as well. This is all within our reach and I hope we can deliver it in the next 10 years."

Clearly, investors are eager to take advantage of the potential offered by the boom in artificial intelligence. What was once merely a prospect for the future has now become reality.

Besides the fact that major companies are now investing in artificial intelligence, investors are also factoring the significant strides AI has made in the last few years. What began as crude ideas just thirty years ago has now evolved into advanced technology. As the costs of hardware continue to fall at a rapid rate, AI is developing even more quickly. Consequently, hardware costs are no longer a barrier to entry.

According to the Machine Intelligence Research Institute, as much as 10% of all computer science research is now focused on AI. Add in the fact that some of the smartest people in the world are working on artificial intelligence development, and it is easy to see why AI has become such a hot tech industry in which to invest.

For investors who are wondering where to get started with investing in AI technology, it's important to understand which companies currently hold the most patents. For now, the company holding the largest number of patents is IBM (IBM), with more than 500 artificial intelligence patents. While big names like Google and IBM are leading the foray into AI development, there are also many other, smaller companies that investors may wish to consider if they're interested in getting in on the ground floor. Such companies include MobileEye, Marketo and Nidec.

MobileEye

Recently experiencing a 6% jump in shares for its embedded camera sensor, MobileEye is poised for incredible growth in the future. Currently, shares are at about $57, but R.W. Baird has recently increased its rating for the firm's shares, increasing it from Neutral to Outperform. Furthermore, R.W. Baird's David Leiker has stated that he thinks the company's shares could reach as much as $170 within the next five years.

Marketo

A U.S.-based company focusing on personalizing customer engagement via artificial intelligence, Marketo has been rated as a buy. The firm ranked 78th on the Inc. 500 in 2012 and has been ranked #7 among software companies and first among marketing software companies. Given that research has shown that AI-based email conversations are capable of quadrupling lead engagement and delivering more effecting marketing and sales campaign, the potential for artificial intelligence to be used in customer engagement and marketing efforts has become even more relevant. (See also How Smartphones Are Changing Advertising & Marketing.)

Nidec

Nidec is the world's number one comprehensive motor manufacturer handling "everything that spins and moves" whether miniature or gigantic. With an eye toward a crash-free future, many automobile manufacturers, including Nidec, are working on developing automated driving systems that would allow a car to safely take you to your destination without passenger inputs, with the ultimate goal of protecting human lives. (See also Self-Driving Cars Could Change The Auto Industry.)

The Bottom Line

According to Goldman Sachs, when referring to artificial intelligence, our society is currently "on the cusp of a period of more rapid growth in its use and applications."

The future for artificial intelligence is already here, as more up-and-coming AI companies emerge onto the market. Now is certainly the time to get involved with artificial intelligence. Investors who are ready and able to become involved in AI investing could be poised to enjoy handsome returns when AI development hits mass production.

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Machine learning is the idea that a computer program can adapt to new data independently of human action. Machine learning is a field of artificial intelligence (AI) that keeps a computer’s built-in algorithms.